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OMB Proposes Grants Management Reform

Category: Articles

In response to a February 2011 Executive Order on regulatory flexibility, the OMB is issuing proposed guidance in the Federal Register and is seeking input from the federal grants community.  The subject areas include the following.

Audit Requirements   

The threshold for A133 audits may be raised from the current $500,000 to $1 million.  Further, they suggest that entities expending between $1 million and $3 million will have a more focused version of the Single Audit.  Testing of major programs will center on only two areas of compliance: allowable and unallowable cost, plus one selected by the agencies given risks of improper payments, waste, fraud, and abuse surrounding the program. 

Entities expending more than $3 million would undergo a full scope Single Audit, with testing of major programs focused on perhaps six areas of compliance, reduced from 14 as currently required.  This would raise expectations for increased testing, larger sample sizes, or lower levels of materiality, to better address the aforementioned risks.

In addition, OMB is exploring alternatives for better coordination in Single Audit oversight by federal agencies and pass-through agencies, including resolution of audit findings that cut across multiple agencies’ programs.

Cost Principles

OMB is considering consolidating the cost principles into a single document.  In addition, OMB is exploring the use of predetermined indirect rates that would not be subject to subsequent adjustment and that would remain in place for multiple years.

Federal grantor agencies and grantee organizations have both complained about the administrative burden associated with supporting documentation for employee compensation charged to grants.  Accordingly, OMB is looking for better, more efficient time and effort reporting methods.

Administrative Requirements

OMB wants to identify areas of past performance by grantees that agencies can use to better assess recipient risk.  Factors will include, but not be limited to, financial management, internal controls, and ability to meet deadlines.

OMB also wants to identify what standards a federal agency should consider in evaluating recipient merit prior to making an award.  Further, more effective and efficient methods to collect the information required for this evaluation have to be explored.

This effort will result in a significant overhaul of regulations and compliance surrounding federal awards.  OMB wants your input on this reform.  So look for the announcement in the Federal Register and let your voice be heard.  Rubino & McGeehin will be following this proposal.

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